HYDERABAD, Andhra Pradesh— Massive crowds gathered in Hyderabad, the capital of the southern state of Andhra Pradesh, to welcome Y.S. Jaganmohan Reddy, a leading politician of the state, who was released from a local prison on bail on Tuesday. Mr. Reddy, who founded the Y.S.R. Congress Party in 2009, spent 485 days in prison after being arrested over corruption charges. A court of India’s premier federal investigative agency, Central Bureau of Investigation (C.B.I.) granted him bail Monday after being ordered by the Supreme Court of India.

Mr. Reddy’s release is a significant event in the politics of the state. Elections for the state legislature and the lower house of the Indian parliament are expected in 2014.

India’s ruling Congress Party won 33 and 29 out of 42 parliamentary seats in the national elections of 2009 and 2004 in Andhra Pradesh respectively. The embattled Congress Party desperately needs to win in the 2014 national elections in the state, if it has to have any chance to form the federal government.

Y. S. Rajasekhara Reddy, the state chief minister and the man who won the May 2009 elections for the Congress Party in the state, died in a September 2009 helicopter crash. Y.S. Jaganmohan Reddy, who was released from prison Tuesday, is the deceased chief minister’s son. Mr. Reddy broke ranks with his father’s party and founded his own Y.S.R. Congress party, after the Congress leadership refused to offer him the post of the chief minister in his father’s place. Analysts see the influence of the Congress Party behind Mr. Reddy’s arrest and release.

To ensure maximum electoral benefits, on July 30, the Congress-led federal government lent its support to the old demand to bifurcate the existing state and create a separate state for Telangana region, where the Telangana Rashtra Samithi (T.R.S.) party had led a separatist agitation. By putting its weight behind the creation of a separate Telangana, the Congress Party ensured that the T.R.S. would either support it in the forthcoming elections or merge with it.

In the Seemandhra region, where people oppose the division of Andhra Pradesh, protests have continued for more than a month against the federal government’s decision. The people of the Seemandhra region fear the loss of the capital Hyderabad to the new state of Telangana. Millions of residents of Seemandhra have migrated to Hyderabad to benefit from the economic boom in the city.

“Congress has a clear game plan to maximize its seats in Andhra Pradesh using Telangana and Jagan Reddy as issues in the two regions,” said Sanjaya Baru, political analyst and former media adviser to Prime Minister Manmohan Singh. “Congress now hopes to win in Telangana with the help of the Telangana Rashtra Samithi (T.R.S.) over the Telangana issue. In Seemandhra, it hopes that Jagan Reddy, with whom they have stuck a secret deal, will win for it in proxy, by publicly opposing Telangana. Jagan Reddy will support Congress after the elections,” said Mr. Baru.

Mr. Reddy’s Y.S.R. Congress party won a spectacular slew of by-elections caused by the resignation of his mother and other Congress Party lawmakers in the state legislature loyal to his family. In his own election to the lower house of the Indian parliament, Mr. Reddy got an overwhelmingly large number of votes in comparison to his opponents—a sign of his popularity, which caused considerable anxiety to the Congress Party. The Congress-led federal government ordered an investigation by the Central Bureau of Investigation into corruption cases against Mr. Reddy and had him arrested.

N. Chandrababu Naidu, the former chief minister of Andhra Pradesh, who leads the Telugu Desam Party, accused Mr. Reddy of amassing over Rs. 100,000 crore, or $20 billion through graft. “It is a test-case for democracy that a person who has looted the public exchequer on this scale is being helped by the Congress to escape the law,” said Mr. Naidu, who believes Mr. Reddy was released after he struck a deal with the Congress Party.

Bharathi Reddy, Mr. Reddy’s wife, refuted having made any deal with the Congress Party. “Why would we see him in jail for nearly 16 months and then make a deal with Sonia Gandhi,” she said. “Y.S.R. Congress will sweep the upcoming elections because we have openly opposed Telangana and are fighting for a united Andhra Pradesh.”

Mr. Reddy’s release will energize the Y.S.R. Congress. His opposition to the creation of Telangana and the sympathy generated by his time in prison, which was perceived as punishment for his rebellion against the Congress Party, will help his electoral prospects.

The prospect of rapprochement between the ruling Congress Party and Mr. Reddy’s Y.S.R. Congress has pushed his competitor, Telugu Desam Party toward the national opposition party, the Bharatiya Janata Party. “The Congress has put the country and the state in peril. We have to rise to give an alternative, as we have historically done, helping create non-Congress central governments in 1989, 1995 and 1998. We will keep all options open to defeat the Congress game plan,” said Mr. Naidu.

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